HW for Exam 3

If in some year real GDP was $5 trillion and the GDP deflator was 200, what was nominal GDP? NOTE: Give your answer in terms of trillions of dollars and include a negative sign if necessary. Ex: an answer of 1 is $1 trillion.

10

Elizabeth earned $1 million in 2010. According to BLS, the CPI in 2016 was 240.007 and in 2010 the CPI was 218.056. Calculate Elizabeth's income in 2016 dollars. $ 1.1 million. $ 0.91 million. $ 0.46 million. $ 0.42 million.

$ 1.1 million.

The following table pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. ​ Year Price of Peaches (Dollars per bushel) Price of Pecans (Dollars per bushel) Year 1116Year2910 ​ ​ If Year 1 is the base year, then the inflation rate in Year 2 was

4.4

A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of 2.5 percent. 5 percent. 9.5 percent. 25 percent.

5 percent.

Suppose a basket of goods and services has been selected to calculate the CPI in France and 2000 has been selected as the base year. In 2000, the basket's cost was 200 euros; in 2001, the basket's cost was 210 euros; and in 2002, the basket's cost was 230 euros. The inflation is equal to 5% in 2000. 4.8% in 2000. 5% in 2001. 4.8% in 2001.

5% in 2001.

A worker received $5 for a daily wage in 1930. What is the value of that wage today if the CPI was 17 in 1930 and is 230 today?

67.65

A U.S.-owned automobile factory uses $50 million worth of materials produced in the U.S. and $10 million worth of material purchased from foreign countries to produce $100 million of automobiles. $70 million worth of these automobiles are purchased by U.S. consumers, $25 million are sold in foreign countries, and $5 million are added to inventory. How much of this production is included in U.S. GDP? NOTE: Give your answer in terms of millions of dollars and include a negative sign if necessary. Ex: an answer of 1 is $1 million.

90

If the German government buys personal protective equipment for medical staff made in China in 2020, which component(s) of the GDP is (are) affected? only G. G and NX. I. I and NX.

G and NX.

The banking system currently has $1 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change? a. It falls by $12 billion. b. It rises by $19 billion. c. It falls by $21 billion. d. It falls by $19 billion.

a. It falls by $12 billion.

Table 29-4 Bank of PleasantvilleAssetsLiabilitiesReserves$3,000 Deposits$50,000 Loans47,000 ​ Refer to Table 29-4. Assume the Fed's reserve requirement is 5 percent and all banks besides the Bank of Pleasantville are exactly in compliance with the 5 percent requirement. Further assume that people hold only deposits and no currency. Starting from the situation as depicted by the T-account, if the Bank of Pleasantville decides to make new loans so as to end up with no excess reserves, then by how much does the money supply eventually increase? a. $13,000.00 b. $8,333.33 c. $10,000.00 d. $10,833.33

c. $10,000.00

Which of the following demonstrates human capital and physical capital in that order? a. For a brick layer: her bricks and her tools b. For a medical office: the building and the doctors' knowledge of medicine c. For a restaurant: the chefs' knowledge about preparing food and the equipment in the kitchen d. For a gas station: the pumps and the cash register

c. For a restaurant: the chefs' knowledge about preparing food and the equipment in the kitchen

Which of the following statements is correct? a. Human capital and technological knowledge are the same thing. b. A nation cannot be highly productive in producing goods and services without abundant quantities of natural resources. c. All technological knowledge is proprietary. d. Human capital per worker is a determinant of productivity.

d. Human capital per worker is a determinant of productivity.

A bank has a 10 percent reserve requirement, $36,000 in loans, and has loaned out all it can, given the reserve requirement. a. It has $3,600 in deposits. b. It has $32,400 in deposits. c. It has $39,600 in deposits. d. It has $40,000 in deposits.

d. It has $40,000 in deposits.

If the reserve ratio is 5%, then an additional $500 of loans can increase the money supply by as much as $25 $100 $2,500 $10,000

$10,000

A bank's deposits are 20,000. If the bank's reserve ratio is exactly 10% then, its reserves amount to $200 $2,000 $20,000 $200,000

$2,000

A bank's reserve ratio is 5% and the bank has $10,000 in deposits. Its reserves amount to $50 $500 $5,000 $9,500

$500

All U.S. paper dollars read "This note is legal tender for all debts, public and private". This statement represents which characteristic of US currency? The U.S. operates under the gold standard. U.S. paper money is commodity money. U.S. paper money is fiat money. U.S. paper money is a convenient store of wealth.

U.S. paper money is fiat money.

By far the largest category of goods and services in the CPI basket is a. transportation. b. housing. c. education & communication. d. food & beverages.

b. housing.

Other things the same, if reserve requirements are increased, the reserve ratio a. increases, the money multiplier increases, and the money supply increases. b. increases, the money multiplier decreases, and the money supply decreases. c. decreases, the money multiplier decreases, and the money supply increases. d. decreases, the money multiplier increases, and the money supply increases.

b. increases, the money multiplier decreases, and the money supply decreases.

The nominal interest rate tells you a. the number of dollars in your bank account today. b. how fast the purchasing power of your bank account rises over time. c. how fast the number of dollars in your bank account rises over time. d. the purchasing power of your bank account today.

c. how fast the number of dollars in your bank account rises over time.

As long as prices are rising over time, then a. the real interest rate exceeds the nominal interest rate. b. the nominal interest rate is a better indicator than the real interest rate of how fast the purchasing power of your bank account is changing over time. c. the real interest rate is positive. d. the nominal interest rate exceeds the real interest rate.

d. the nominal interest rate exceeds the real interest rate.

During a presidential campaign, the incumbent argues that he should be reelected because nominal GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period and that the GDP deflator increased by 6 percent during the past 4 years. You should conclude that real GDP per person a.decreased. b.was unchanged. c.grew, but by less than 12 percent. d.grew by more than 12 percent.

c.grew, but by less than 12 percent.

Last year real GDP per person in the imaginary nation of Olympus was 4,250. The year before it was 4,100. By about what percentage did Olympian real GDP per person grow during the period? a. 2.5 percent b. 1.6 percent c. 6 percent d. 3.7 percent

d. 3.7 percent

During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action increases the money multiplier and increases the money supply. decreases the money multiplier and decreases the money supply. does not change the money multiplier, but increases the money supply. does not change the money multiplier, but decreases the money supply.

decreases the money multiplier and decreases the money supply.

If a bank's reserve ratio is exactly 20%, then an additional $100 of loans can increase the money supply by as much as $5 $20 $500 $2,000

$500

The U.S. buys $500 billion of goods and $250 billion of services from foreign countries. Foreign countries buy $250 billion of goods and $300 billion of services from the U.S. What is net exports? NOTE: Give your answer in terms of billions of dollars and include a negative sign if necessary. Ex: an answer of 1 is $1 billion.

-200

The following table contains data for country A for the year 2019. ​ Household purchases of durable goods$1,293Household purchases of nondurable goods$1,717Household purchases of services$301Household purchases of new housing$704Purchases of capital equipment$310Inventory changes$374Purchases of new structures$611Depreciation$117Salaries of government workers$1,422Government expenditures on public works$553Transfer payments$777Foreign purchases of domestically produced goods$88Domestic purchases of foreign goods$120 ​ What were country A's net exports in 2019? NOTE: Include a negative sign if necessary.

-32

A country produces only ice cream and cake in the quantities and prices listed below. Use 2011 as the base year. Year Price of Ice Cream Quantity of Ice Cream Price of Cake Quantity of Cake 2011 $2.00 200 $10 40 2012 $2.30 250 $14 50 2013 $2.75 280 $18 80 Calculate real GDP for the year 2012.

1000

Suppose a basket of goods and services has been selected to calculate the CPI and 2014 has been selected as the base year. In 2013, the basket's cost was $80; in 2014, the basket's cost was $86; and in 2015, the basket's cost was $90. The value of the CPI in 2015 was 112.5 and the inflation rate was 12.5%. 112.5 and the inflation rate was 4.6%. 104.6 and the inflation rate was 4.6%. 4.6 and the inflation rate was 12.5%.

104.6 and the inflation rate was 4.6%.

Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2017. Suppose the price index was 17.6 in 1944 and 218.4 in the current year. Sue Holloway's 1944 income in current year dollars is

148,909

A country produces only ice cream and cake in the quantities and prices listed below. Use 2011 as the base year. Year Price of Ice Cream Quantity of Ice Cream Price of Cake Quantity of Cake 2011 $2.00 200 $10 40 2012 $2.30 250 $14 50 2013 $2.75 280 $18 80 Calculate the GDP deflator for 2013.

162.5

The following table lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. ​ Month Price of Gas (Dollars per gallon) Price of Milk (Dollars per gallon) April2.003.50May3.503.52June3.853.58 ​ What is the consumer price index for May?

167

If $500 of new reserves generates $1000 of new money in the economy, then the money multiplier is 2 and the reserve ratio is 50 percent. 2 and the reserve ratio is 2 percent. 0.5 and the reserve ratio is 50 percent. 0.5 and the reserve ratio is 2 percent.

2 and the reserve ratio is 50 percent.

A Texas household receives a Social Security check for $1500, which it uses to purchase a $40 pair of shoes made in Thailand by a Thai firm, a $1240 television made by a Korean firm in Korea, and $220 on groceries from a local store. As a result, U.S. GDP increases by $__________.

220

A country produces only ice cream and cake in the quantities and prices listed below. Use 2011 as the base year. Year Price of Ice Cream Quantity of Ice Cream Price of Cake Quantity of Cake 2011 $2.00 200 $10 40 2012 $2.30 250 $14 50 2013 $2.75 280 $18 80 Calculate nominal GDP for the year 2013.

2210

The following table pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaches and 10 bushels of pecans. ​ Year Price of Peaches (Dollars per bushel) Price of Pecans (Dollars per bushel) Year 1116Year2910 ​ ​ The cost of the basket in Year 1 was

225

In 2010, the basket's cost was $3,200; in 2011, the basket's cost was $4,000; and in 2012, the basket's cost was $4,500. 2012 is selected as the base year. Inflation in 2011 is equal to

25

The following table contains data for country A for the year 2019. ​ Household purchases of durable goods$1,293Household purchases of nondurable goods$1,717Household purchases of services$301Household purchases of new housing$704Purchases of capital equipment$310Inventory changes$374Purchases of new structures$611Depreciation$117Salaries of government workers$1,422Government expenditures on public works$553Transfer payments$777Foreign purchases of domestically produced goods$88Domestic purchases of foreign goods$120 ​ What was country A's consumption in 2019?

3,311

Assume that Greece only makes feta cheese. In 2010, Greece made 100 ounces of feta that were sold for $2 each. In 2012, Greece made 200 ounces of feta that were sold for $4 each. In 2014, Greece made 140 ounces of feta that were sold for $6 each. The base year is selected to be 2010. Calculate GDP deflator for 2014.

300

Both Rachel and Monica are from the US. Rachel sells 1 pound of flour to Monica for $2 to produce cookies in her restaurant. Monica makes 100 cookies and sells half of them to Joey in the US and half to Ross in England. The price of the cookies is $3 for both consumers. Considering only these 3 transactions, what is the GDP in the US? $200 $300 $302 $400 $402 $202

300

Last quarter Newton computers produced 3,000 computers. Two thousand of these computers were sold to households, 750 were sold to businesses, and 250 were added to Newton's inventory. How many of the computers should have been included in last quarter's GDP?

3000

Your parents are US citizens. They buy a used car from a German family friend that is also a US citizen, which component of the GDP in the US is affected? C G I NX None of the above.

None of the above.

Country A has a population of 1,000, of whom 800 work 8 hours a day to make 128,000 final goods. Country B has a population of 2,000, of whom 1,800 work 6 hours a day to make 270,000 final goods. a. Country A has lower productivity and lower real GDP per person than country B. b. Country A has higher productivity and higher real GDP per person than country B. c. Country A has higher productivity but lower real GDP per person than country B. d. Country A has lower productivity but higher real GDP per person than country B.

a. Country A has lower productivity and lower real GDP per person than country B.

Last year real GDP in the imaginary nation of Oceania was 561.0 billion and the population was 2.2 million. The year before, real GDP was 500.0 billion and the population was 2.0 million. What was the growth rate of real GDP per person during the year? a. 10 percent b. 2 percent c. 4 percent d. 12 percent

b. 2 percent

Table 24-5 ​ The following table shows the value of the consumer price index and the nominal interest rate for three consecutive years. ​ YearCPI Nominal Interest Rate (Percent) 1233.02.42236.72.53237.02.1 ​ Refer to Table 24-5. What was the real interest rate in Year 3? a. 2.2% b. 2.0% c. 1.8% d. 2.4%

b. 2.0%

The manager of the bank where you work tells you that your bank has $6 million in excess reserves. She also tells you that the bank has $400 million in deposits and $362 million in loans. Given this information you find that the reserve requirement must be a. 1.7 percent. b. 8 percent. c. 9.5 percent. d. 11 percent.

b. 8 percent.

Country A had a population of 1,000, of whom 600 worked an average of 8 hours a day and had a productivity of 2.5. Country B had a population of 800, of whom 560 worked 8 hours a day and had productivity of 3.0. Productivity is the number of final goods produced per working hour. a. Country B had the higher level of real GDP and Country A had the higher level of real GDP per person. b. Country B had the higher level of real GDP and real GDP per person. c. Country A had the higher level of real GDP and real GDP per person. d. Country A had the higher level of real GDP and Country B had the higher level of real GDP per person.

b. Country B had the higher level of real GDP and real GDP per person.

When the consumer price index rises, the typical family a. can offset the effects of rising prices by saving more. b. has to spend more dollars to maintain the same standard of living. c. finds that its standard of living is not affected. d. can spend fewer dollars to maintain the same standard of living.

b. has to spend more dollars to maintain the same standard of living.

A newspaper article informs you that most businesses reduced production in the last quarter but also sold from their inventories during the last quarter. Based on this information GDP likely a.increased. b.decreased. c.stayed the same. d.may have increased, decreased, or stayed the same.

b.decreased.

Suppose that in 2018, the producer price index increases by 1.5 percent. As a result, economists most likely will predict that a. GDP will increase in 2019. b. the consumer price index will increase in the future. c. interest rates will decrease in the future. d. the producer price index will increase by more than 1.5 percent in 2019.

b.the consumer price index will increase in the future.

If the reserve ratio is 5 percent, banks do not hold excess reserves, and people do not hold currency, then when the Fed purchases $20 million worth of government bonds, bank reserves a. increase by $20 million and the money supply eventually increases by $100 million. b. decrease by $20 million and the money supply eventually decreases by $400 million. c. decrease by $20 million and the money supply eventually decreases by $100 million. d. increase by $20 million and the money supply eventually increases by $400 million.

d. increase by $20 million and the money supply eventually increases by $400 million.

Suppose an economy produces only iPhones and bananas. In 2010, 1000 iPhones are sold at $300 each and 5000 pounds of bananas are sold at $3 per pound. In 2009, the base year, iPhones sold at $400 each and bananas sold at $2 per pound. For 2010, nominal GDP is $315,000, real GDP is $410,000, and the GDP deflator is 76.83. nominal GDP is $410,000, real GDP is $315,000, and the GDP deflator is 130.16. nominal GDP is $315,000, real GDP is $410,000, and the GDP deflator is 130.16. nominal GDP is $410,000, real GDP is $315,000, and the GDP deflator is 76.83.

nominal GDP is $315,000, real GDP is $410,000, and the GDP deator is 76.83.